Katie Goldstein on Impact of 2nd Circ. Decision Tossing Securities Fraud Convictions

For its article “New York Securities Fraud Ruling Threatens US White-Collar Cases,” Bloomberg Law quoted Akin white collar defense and government investigations partner Katherine Goldstein. The article discusses the Second Circuit decision in United States v. Blaszczak, in which the court invalidated four securities fraud convictions because it held that the Center for Medicare and Medicaid Services’ (CMS) confidential information used by the four defendants could not be considered as “property” under wire and securities fraud laws. The article notes that this decision could undermine Department of Justice enforcement of insider trading, crypto fraud and other white collar crimes.

Goldstein, who served as Chief of the Securities and Commodities Fraud Task Force in the U.S. Attorney’s Office for the Southern District of New York, said that prosecutors will now have to ask themselves: “Does the Blaszczak decision cast doubt on the theory that this intangible information will be recognized as constituting property?” She added that this was not a question that prosecutors had been asking themselves.

The article notes that the court had determined that the nonpublic CMS information wasn’t property because it is not the agency’s “stock in trade” for sale to the public. Said Goldstein, who was appointed by the Second Circuit to file an amicus brief arguing the Blaszczak convictions should be upheld, “All of a sudden you’re asking yourself, well is earnings information a business’s ‘stock in trade’? Not really. What would typically be considered valuable inside information out of a public company—top line revenues, earnings—that’s not usually a business’s ‘stock in trade.’ Does that qualify?”

Bloomberg Law writes that the decision could also create uncertainty in cryptocurrency enforcement, where there is an open question as to whether digital assets meet the definition of a “security” under Title 15 securities fraud. Goldstein said that Justice Dept. prosecutors had been turning to Title 18’s wire fraud statute as a workaround and “panacea,” but now, “this opinion makes Title 18 in some respects as unstable as Title 15.”